Pork producers must adapt
MERRILL, Iowa — Marketing hogs was once fairly simple, Joe Rotta said.
The Northwest Iowa producer would haul hogs to the John Morrell plant in Sioux City, Iowa, about a half-hour drive from his Plymouth County farm. It cost him about $400 per load, Rotta said. But after the Morrell plant closed in April 2010, Rotta was forced to look elsewhere to find the bids he wants. Often hogs are trucked to the Triumph Foods plant in St. Joseph, Missouri, at a cost of $1,200 per load.
“We had a very good relationship with the Morrell buyer for many years,” Rotta said. “Now it’s more difficult to find a bid.”
He said Triumph will take heavier pigs. The Hormel plant in Fremont, Nebraska, is also an option, but Rotta said that plant favors pigs in the 280-pound range.
“If you can fit their box, it’s going to pay better,” he said.
Rotta said there are other packers in his area, but the bids are not as good as he can get elsewhere.
“You don’t get as many calls as you would hope,” he said.
He is part-owner of a sow unit near Newell, Iowa, and finishes pigs on his farm. He markets about 12,000 pigs annually.
Having access to several markets is valuable to hog producers, said Steve Meyer, vice-president for pork analysis with Express Markets Inc. Analytics. He said Iowa is fortunate to have so many packers in the region, which should result in competitive bids. Other states are not as fortunate. But losing a plant is never good, he said.
“You aren’t just losing another bidder,” Meyer said. “Your costs are going to go up because of the increased transportation expense.”
Packer capacity in the Midwest has been able to handle increased numbers of hogs, Meyer said. This fall could be another story.
“We are going to be very tight for capacity in November and December,” he said. “We are getting some help in the Midwest with more hogs being killed at facilities in Pleasant Hope, Missouri, and Windom, Minnesota, but that’s just 6,500 per day. That won’t be enough to handle what’s coming late this fall.”
Larger plants are scheduled to open next July in Sioux City and Coldwater, Michigan, and Meyer said that will help a great deal. Because of the reduced capacity and large supplies, producers are more interested in risk management.
“We are seeing some very aggressive risk management the last few years,” Meyer said.
He said the hog industry is moving ahead with expansion, creating a strain on current capacity and putting a dent in market access.
“Even with losses in the fourth quarter, it will be a profitable year and marginally profitable in 2017,” Meyer said. “There are a lot of sows being added out there.”
Closing a plant can be devastating to the community, said Ed Wallace, deputy director of Iowa Workforce Development. He said the impact works its way down through most parts of a community.
“Any time you have a large facility close, the supply chain and the residual elements are going to be affected,” Wallace said. “But we’ve also seen communities become resilient and work to bring a new business into these plants and keep the plant’s employees.”
He said tens of thousands of Iowans are employed in packing and processing plants. The plants also bring people into the state, and while some are seasonal employees, others stay and make the state their home.
“The workforce is very mobile today, but we are seeing a lot of those employees stay in those communities,” he said.
When a plant is closing, Wallace said, it is important that the community work with the owner to help find a replacement.
“We need to have that communication,” he said. “In Denison, (Iowa), the community was able to work with Tyson when they closed the beef plant, and now Quality Food Processors is expanding and looking to hire some of those workers.
“It’s important that communities look to be thoughtful and innovative when there is a plant closure.”
Rotta said he is looking forward to the opening of the new plant in Sioux City, owned jointly by Triumph Foods and Seaboard Foods. The plant is expected to employ more than 1,000 people.
“I think that is going to be a really nice option for us and other producers, because we’re hearing they are going to buy a large percentage of hogs on the open market,” Rotta said.
He said with large hog numbers expected and less packer capacity, marketing alternatives may need to be pursued.
“I think this fall, I’m probably going to give a broker a call since they have the contacts,” Rotta said. “It sounds like there are going to be a lot of hogs out there, and we want to make sure ours have a place to go.”